22 ANNUAL REPORT 2013

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INDEPENDENT AUDITORS TO THE MEMBERS OF HFC BANK GROUP 22 Report on the financial statements We have audited the accompanying financial statements of HFC Bank (Ghana) Limited, (the Bank) and its

1 INDEPENDENT AUDITORS TO THE MEMBERS OF HFC BANK GROUP 22 Report on the financial statements We have audited the accompanying financial statements of HFC Bank (Ghana) Limited, (the Bank) and its subsidiaries (together, the Group) which comprise the statement of financial position as at 31 December, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended of the Bank; together with the consolidated statements of financial position as at 31 December, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended of the Group; and a summary of significant ing policies and other explanatory information, and the directors report, as set out on pages 24 to 25 and 35 to 111. Directors responsibility for the financial statements Bank s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of ing policies used and the reasonableness of ing estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank and the Group as at 31 December and of their financial performance and their cash flows for the year then ended, in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738).

INDEPENDENT AUDITORS TO THE MEMBERS OF HFC BANK GROUP Report on other legal requirements Companies Act, 1963 (Act 179) requires that in carrying out our audit we consider and report on the following

2 INDEPENDENT AUDITORS TO THE MEMBERS OF HFC BANK GROUP Report on other legal requirements Companies Act, 1963 (Act 179) requires that in carrying out our audit we consider and report on the following matters. We confirm that: We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; In our opinion proper books of have been kept by the Group, so far as appear from our examination of those books Proper returns adequate for the purpose of our audit have been received from branches not visited by us; and (balance sheet) statement of financial position and the (profit and loss ) income statement portion statements of the statement of comprehensive income are in agreement with the books of. iv bank has generally complied with the provisions of the Banking Act, 2004 (Act 673), as amended. Pamela Des Bordes (ICAG/P/1329) For and on behalf of Ernst & Young (ICAG/F/2014/126) Chartered Accountants Accra, Ghana Date: 17th March Banking Act, 2004 (Act 673) Section 78(2) requires that we state certain matters in the report. We confirm that: i. s give a true and fair view of the state of affairs of the bank and its results for the period. ii. iii. bank s transactions were within the powers of the bank and We were able to obtain all relevant information and explanations required for the efficient performance of our functions.

Statement of Financial Position As at 31 December At 31 December Assets Note Bank Bank 2012 Group Group 2012 Cash and balances with Bank of Ghana 14 180,209,971 71,930,479 184,337,284 71,930,479 Due

3 Statement of Financial Position As at 31 December At 31 December Assets Note Bank Bank 2012 Group Group 2012 Cash and balances with Bank of Ghana ,209,971 71,930, ,337,284 71,930,479 Due from other banks 15 55,071,312 60,104,578 55,071,312 60,104,578 Government securities ,526,748 65,097, ,782,871 67,715,838 Pledged assets (Repos) 17 6,000,000 6,500,000 6,000,000 6,500,000 Loans and advances to customers ,063, ,814, ,708, ,164,156 Loans and advances to banks and financial institutions 19 3,610,933 3,560,780 3,610,933 3,560,780 Investment securities 20 1,432,230 1,471,137 2,515,431 2,562,436 investments 21 22,445,427 6,298,433 22,695,427 7,298,433 assets 22 20,699,495 12,383,269 40,048,863 24,059,259 Derivative Asset 23 7,501,515 4,561,425 7,501,515 4,561,425 Investment in subsidiaries 24a 5,517,334 4,031,222 Investment in venture capital fund 24b 9,705,926 1,804,381 9,705,926 1,804,381 Property, plant and equipment 25 16,454,491 13,280,265 18,142,644 14,361,896 Intangible asset Goodwill 13 3,931,286 3,931,286 Current income tax assets 27 1,896, , , ,045 assets 973,066, ,786, ,011, ,225,706 Liabilities and equity Deposits from customers ,589, ,963, ,589, ,379,704 Deposits from banks and financial institutions 29 41,937,066 44,844,818 41,937,066 44,844,818 Due to other banks 30 35,000,000 35,000,000 liabilities 31 46,328,934 18,642,450 63,194,499 21,076,365 Derivative Liability 32 6,898,391 4,410,695 6,898,391 4,410,695 Bonds 33 67,437,494 58,128,268 67,437,494 58,128,268 Borrowings 35 49,249,559 20,901,374 49,249,559 20,901, Short term borrowings ,165, ,165,010 Deferred tax , , , ,878 liabilities 809,371, ,431, ,280, ,280,102 capital 36 95,126,624 95,126,624 95,126,624 95,126, ,886,476 1,067,248 19,871,411 5,669,364 fund 37 40,844,598 19,325,453 40,844,598 19,715, ,618,495 4,618,495 4,634,139 4,634,139 development , , , , ,280,979 6,280,394 10,280,979 6,280, , , , ,794 equity before non controlling interest 163,694, ,355, ,695, ,363,069 Non controlling interest 43 1,035, ,535 equity 163,694, ,355, ,730, ,945,604 liabilities and equity 973,066, ,786, ,011, ,225,706 financial statements on pages 9 to 91 were approved by the Board of directors on 17th March 2014 and signed on its behalf by: Chairman: Managing Director:

4 Statement of Comprehensive as at 31 December Twelve Months ended 31 December Bank Bank Group Group Note Interest income 4 115,623,273 66,121, ,959,015 68,768,032 Interest expense 5 (39,412,557) (23,336,427) (39,306,755) (23,304,605) Net interest income 76,210,716 42,785,357 80,652,260 45,463,427 Fee and commission income 6 18,404,540 12,603,162 25,582,454 17,218,865 Fee and commission expense 7 (615,660) (284,399) (650,441) (284,399) Net fee and commission income 17,788,880 12,318,763 24,932,013 16,934,466 operating income 8a 773, ,155 5,756,206 3,960,090 Trading 8b 16,427,374 4,951,139 16,427,374 4,951,139 Operating income 111,200,733 60,867, ,767,853 71,309,122 Operating expenses 9 (55,172,046) (40,584,921) (67,460,692) (47,942,821) Impairment charge for credit losses 18 (10,182,707) (5,565,880) (10,182,707) (5,565,880) 36 Operating profit 45,845,980 14,716,613 50,124,454 17,800,421 income 10 1,684, ,958 1,934,323 1,016,393 Profit for the year 47,530,368 15,715,571 52,058,777 18,816,814 National Stabilisation Levy 52 (1,188,259) (1,297,877) Tax expense 11 (10,003,151) (2,690,224) (10, 9 75, 9 91) (3,392,858) Profit after tax 36,338,958 13,025,347 39,784,909 15,423,956 Attributable to: holders of the parent 36,338,958 13,025,347 39,332,156 15,271,999 Non controlling interest , ,957 36,338,958 13,025,347 39,784,909 15,423,956 comprehensive income, net of tax comprehensive income for the year 36,338,958 13,025,347 39,332,156 15,271,999 Basic earnings per share (Ghana pesewa) Diluted earnings per share (Ghana pesewas) attached notes 1 to 55 form an integral part of these financial statements.

5 Statements of Changes in 31 December Attributable to equity holders of the Bank Bank dev t s (note 42) Balance at 1 January 95,126,624 1,067,248 19,325,453 4,618, ,680 6,280, , ,355,688 Profit for the year 36,338,958 36,338,958 Dividend statutory (21,519,145) 21,519,145 housing development Repurchase of shares share deals regulatory (4,000,585) 4,000,585 At 31 December 95,126,624 11, 8 8 6, ,844,598 4,618, ,680 10,280, , ,694,646 Attributable to equity holders of the Bank Share deals (note 41) development Reserve (note 42) 37 Bank January 45,000,624 9,237,074 12,812,779 4,618, ,680 1,402, , ,009,334 Profit for the year 13,025,347 13,025,347 Executive Share Option Plan (ESOP) 126, ,000 Share Issue 50,000,000 50,000,000 Dividend (9,146,302) (9,146,302) statutory Repurchase of shares (6,512,674) 6,512,674 (658,691) (658,691) Share deals (658,691) 658,691 Transfers to regulatory credit risk (4,877,506) 4,877,506 At 31 December 95,126,624 1, 0 67, ,325,453 4,618, ,680 6,280, , ,355,688

6 Statements of Changes in 31 December Attributable to equity holders of the parent company Group capital Reserve development Reserve s (note 42) Non controlling interest (note 43) Balance at 1 January 95,126,624 5,669,364 19,715,074 4,634, ,680 6,280, , , ,945,604 Profit for the year 39,332, ,753 39,784,909 ESOP Share Issue Convertible bonds Dividend statutory (21,129,524) 21,129,524 Repurchase of shares share deals credit risk (4,000,585) 4,000,585 At 31 December 95,126,624 19, 8 71, ,844,598 4,634, ,680 10, 2 8 0, ,794 1,035, ,730, Group2012 Attributable to equity holders of the parent company Year capital development Share deals (note 41) Reserves (note 42) Non controlling interest (note 43) Balance at 1 January Profit for the year ESOP 45,000,624 11,592,538 13,202,400 4,634, ,680 1,402, , ,578 77,200,641 15,271, ,957 15,423, , ,000 Share Issue 50,000,000 50,000,000 Dividend (9,146,302) (9,146,302) statutory (6,512,674) 6,512,674 Share deals (658,691) 6 5 8, 6 91 Repurchase of shares (658,691) (658,691) regulatory (4,877,506) 4,877,506 At31 December 95,126,624 5,669,364 19,715,074 4,634, ,680 6,280, , , ,945,604

7 Statement of Cash Flows for the year ended 31 December Twelve Months ended 31 December Bank Group Note Cash flows from Operating activities Cash generated from operations ,649,344 8,671, ,717,950 14,296,837 Interest paidlong term bonds and borrowing 33/35 (4,275,074) (1,287,369) (4,275,074) (1,287,369) Mandatory deposits with Bank of Ghana 14 (91,804,108) (35,837,506) (91,804,108) (35,837,506) Tax paid 27 (10,725,414) (3,586,165) (11,063,053) (4,162,398) National stabilization levy paid 52 (1,108,550) (1,218,168) Net cash generated from operating activities 52,736,198 (32,039,230) 59,357,547 (26,990,436) Cash flows from investing activities Purchase of property,plant and equipment 25 (5,638,309) (2,760,792) (6,774,110) (3,314,004) sale of property, plant and equipment 25 3,455 31,834 84,054 75,930 (Purchase)/Sale of government securities (29,538,818) 14,710,487 (29,584,132) 10,706,584 Purchase of other investments (16,146,994) (742,528) (15,396,994) (1,742,528) Sale of investment securities 38,907 47,005 Purchase of branches (5,707,780) (5,707,780) Investment in associates, subsidiaries and venture capital fund (9,387,657) (881,996) (7,951,545) (74S2,391) 39 Purchase of debt securities (471,137) (1,562,436) Net cash used in investing activities (66,377,196) 9,885,868 (65,283,502) 3,421,155 Cash flows from financing activities Dividend paid 12 (3,839) (9,144,899) (3,839) (9,144,899) Redemption of bonds 33 (665,546) (8,184,204) (665,546) (8,184,204) Borrowings repaid 35 (5,728,668) (3,581,431) (5,728,668) (3,581,431) borrowings 35 32,254,718 18,845,500 32,254,718 18,845,500 ESOP issue 47 63,000 63,000 share issue 36 50,000,000 50,000,000 Net cash generated from financing activities 25,856,665 47,997,966 25,856,665 47,997,966 Increase in cash and cash equivalents 12,215,667 25,844,604 19,980,711 24,428,685 Net foreign exchange difference 6,578,507 6,236,588 6,578,507 6,236,588 At 1 January 117,759,414 85,678, ,377,807 89,712,534 At 31 December ,553, ,759, ,937, ,377,807 attached notes 1 to 55 form an integral part of these financial statements.

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